SMM Evening Comments (Apr 7): Shanghai base metals rose broadly on Beijing’s latest stimulus efforts

Published: Apr 7, 2020 18:01
SHFE nonferrous metals closed higher across the board on Tuesday, as investor sentiment was bolstered by Beijing’s latest economic stimulus efforts and hopes that the spread of the global coronavirus pandemic may be slowing. A moderate rebound in oil prices and concerns about ore supply also helped bolster prices of some metals. Zinc remained the best performer with a one-day gain of 2.9%. Copper jumped 2.2%, tin advanced 1.4%, nickel and lead rose 0.9%, and aluminium climbed 0.8%.

SHANGHAI, Apr 7 (SMM) – SHFE nonferrous metals closed higher across the board on Tuesday, as investor sentiment was bolstered by Beijing’s latest economic stimulus efforts and hopes that the spread of the global coronavirus pandemic may be slowing.

 

A moderate rebound in oil prices and concerns about ore supply also helped bolster prices of some metals.

 

Zinc remained the best performer with a one-day gain of 2.9%. Copper jumped 2.2%, tin advanced 1.4%, nickel and lead rose 0.9%, and aluminium climbed 0.8%.

 

Their counterparts on the LME were also substantially higher, building on gains from Monday.

 

The SHFE was closed on Monday for the Qingming Festival and has yet to resume its night trading session.

 

The People's Bank of China said late Friday it was cutting the amount of cash that small and mid-sized banks must hold as reserves by 100 basis points in two equal steps, the first effective as of April 15 and the second as of May 15, releasing around 400 billion yuan ($56.38 billion) in liquidity to shore up the virus-hit economy. In addition, the interest rates on financial institutions' excess reserves with the central bank would be reduced to 0.35% from 0.72%, effective April 7.

 

Mainland Chinese stocks, which also returned to trade following a Monday holiday, led gains among major markets in Asia, following an overnight sharp rebound on Wall Street that was boosted by as a slew of coronavirus headlines pointing to a potential stabilisation in the US.

 

Copper: The most-traded SHFE May contract opened higher and hit a nearly three-week high of 40,940 yuan/mt in early morning trade, before it pared some gains and hovered in a tight range to end the day 2.19% higher at 40,600 yuan/mt. SHFE copper has stood above the 20-day moving average, but now faces resistance at 41,000 yuan/mt where shorts may take action.

 

Aluminium: The most-liquid SHFE June contract rose to its highest in more than a week at 11,725 yuan/mt in early morning trade, before it eased to close the day 0.78% higher at 11,620 yuan/mt.

 

Zinc: The most-active SHFE June contract hit a three-week high of 15,880 yuan/mt in early morning trade, before it erased some gains to the daily moving average. It later hovered around 15,800 yuan/mt to end the day 2.9% higher at 15,815 yuan/mt. SHFE zinc extended its rally on tight ore supply, and is expected to test 16,000 yuan/mt.

 

Nickel: The most-traded SHFE June contract jumped to the 94,400 yuan/mt level in early morning trade, before it eased to 93,100 yuan/mt on profit-taking and hovered around 93,400 yuan/mt to finish the day 0.9% higher at 93,330 yuan/mt. Support is seen at the five- and 10-day moving averages which are adhering to each other, and at 92,600 yuan/mt. Whether SHFE nickel could remain above 93,000 yuan yuan/mt will come under scrutiny.

 

Lead: The most-active SHFE May contract reached its highest in three-weeks at 13,980 yuan/mt in early morning trade, before it gave back some gains to the daily moving average. It later hovered around at that level to end the day 0.87% higher at 13,865 yuan/mt. SHFE lead is expected to extend its increase in the short-to-medium term, but recovering secondary lead supply will limit upside in prices.

 

Tin: The most-liquid SHFE June contract hit its highest since March 17 at 123,680 yuan/mt in early morning trade, before it pared some gains to close the day 1.37% higher at 121,240 yuan/mt.

Data Source Statement: Except for publicly available information, all other data are processed by SMM based on publicly available information, market communication, and relying on SMM‘s internal database model. They are for reference only and do not constitute decision-making recommendations.

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